Lyndon B. Johnson photo

Presidential Statement No. 7 on Economic Issues: Improving the Tax System.

October 28, 1964

1. THIS administration carried through the most extensive overhaul of our tax system since the war. The improvements have made our tax systems fairer, and have strengthened the economy.

2. The administration did not get everything it initially proposed to the Congress in the area of income tax reform; but many significant reforms were enacted.

3. Within the framework of major net tax reduction, the Revenue Acts of 1962 and 1964 enacted $1.7 billion of revenue-increasing reforms:

--$855 million in the Revenue Act of 1962

--$835 million in the Revenue Act of 1964

--three times more than all of the revenue-increasing reforms enacted during the previous 20 years.

4. Important and much needed reforms involving revenue losses were also enacted. The major reforms of this nature included:

--the minimum standard deduction-which eliminated over 1.2 million low-income taxpayers from any tax liability;

--the introduction of a moving expense deduction;

--a badly needed averaging device providing tax relief for individuals with widely fluctuating incomes.

5. The income tax rate structure was sharply improved.

--Prior to the 1964 Revenue Act there were extreme differences in the way the tax system treated different kinds of income: personal income was taxed as high as 91 percent, corporate income at 52 percent, capital gains at 25 percent, and dividend income enjoyed a preferential treatment through the dividend credit. These wide discrepancies created enormous incentives for people to alter their business operations in order to minimize tax liabilities.

--This differential treatment has now been markedly reduced: starting in 1965 personal income will be taxed at a top rate of 70 percent, corporate income at 48 percent, capital gains still at 25 percent, and the dividend credit will be eliminated. These reduced disparities are in themselves a major reform.

6. This administration intends to seek further tax reform. A better excise tax system is next on our agenda. After that, we will turn again to the income tax.

Note: For a statement by the President announcing a series of statements on economic issues, see Item 707.

Lyndon B. Johnson, Presidential Statement No. 7 on Economic Issues: Improving the Tax System. Online by Gerhard Peters and John T. Woolley, The American Presidency Project https://www.presidency.ucsb.edu/node/241863

Filed Under

Categories

Simple Search of Our Archives